BUDGET 2018 IN BRIEF: From an income tax cut to the economy, the key points of the Chancellor’s speech
- OBR upgrades forecast for GDP growth in 2019 from 1.3% to 1.6%
- Borrowing this year £11.6bn lower than expected at 1.2% of GDP
- £20.5billion real terms increase for the NHS over the next five years
- The NHS 10-Year Plan will include a new mental health crisis service
- Private Finance Initiative and PFI2 schemes abolished
- Threshold for VAT registration to remain unchanged for a further two years
- 2% digital services tax from April 2020 expected to raise £400million a year
- Business rate bills cut by one-third for the next two years for small retailers
- Fuel duty and beer and cider duty frozen
- £2.7bn extra funding for Universal Credit transition
- Income tax-free personal allowance to rise to £12,500 and higher rate threshold to £50,000 from April 2019
Today’s big Budget move was a tax cut for 32million workers as basic rate and higher rate thresholds were raised faster than plans.
There was also brighter news on the economy, help for the High Street and businesses and a change to Help to Buy.
Below pick out the main announcements made by the Chancellor and highlight what the Budget means for you.
What the Budget means for you: The big stories
> Tax-free earnings to rise to £12,500 and 40% bracket to £50,000 from next April: How much will you save from the Budget tax cut?
> Pension tax breaks are safe for now – despite Chancellor’s recent gripes that the bill is ‘eye-wateringly expensive’
> Government makes gifting Premium Bonds from NS&I easier but there is no Isa limit rise for tax-free savers
> Help to Buy extended by another two years but ONLY for first-time buyers – and government reveals new regional price cap
> ‘The best small business Budget he has delivered’: Friendly moves for entrepreneurs and business rates cut welcomed
> Landlords can breathe a collective sigh of relief as buy-to-let Budget worries fail to materialise
> Homeowners who struggle to sell their property and let it instead could be stung with more tax
> Chancellor confirms £28.8bn to upgrade England’s busiest roads and £420m fund to fix potholes
Budget in brief(case): The key points of Budget 2018 at a glance
The Chancellor rose to deliver his Budget Speech at 15.32. It’s eight minutes into the speech before the political point-scoring is over and actual forecasts, facts and policies are dealt with.
- Getting the Brexit deal right will deliver a ‘double deal dividend’, said Mr Hammond. But he also announced an additional £500 million for no-deal preparations.
- Mr Hammond said he was maintaining the headroom to provide firepower to intervene if the economy needs more support in the coming months, and retaining the right to upgrade the Spring Statement to a full Budget.
- Office for Budget Responsibility upgrades forecast for GDP growth in 2019 from 1.3% to 1.6%, then 1.4% in 2020 and 2021; 1.5% in 2022; and 1.6% in 2023.
- OBR predicts 800,000 more jobs by 2023, resulting in over 4.2 million net new jobs since 2010.
- OBR forecasts sustained real wage growth over next five years.
- OBR forecasts the deficit will be less than 1.4% next year, falling to just 0.8% by 2023/24.
- Borrowing this year more than £11.6bn lower than expected at the Spring Statement, at 1.2% of GDP
- Then set to fall from £31.8bn in 2019/20 to £26.7bn in 2020-21, £23.8bn in 2021/22, £20.8bn in 2022/23 and £19.8bn in 2023/24.
- Mr Hammond said he is predicted to meet his structural borrowing target three years early, with borrowing of 1.3% of GDP in 2020/21, maintaining £15.4bn headroom.
- The OBR confirms that debt peaked in 2016/17 at 85.2% of GDP and then falls in every year of the forecast from 83.7% this year; to 74.1% in 2023/24 – allowing the Government to meet its target to get debt falling three years early.
The Chancellor delivering his Budget speech in Parliament.
- Average annual real growth in departmental spending will be 1.2% in the next Spending Review period.
- Hammond pledges a full spending review next year, setting out its priorities for public spending.
NHS / Mental health
- Mr Hammond confirmed a £20.5billion real terms increase for the NHS over the next five years.
- The NHS 10-Year Plan will include a new mental health crisis service, with comprehensive mental health support available in every major A&E, children and young peoples’ crisis teams in every part of the country, more mental health ambulances, more “safe havens” in the community and a 24-hour mental health crisis hotline.
- Mr Hammond announced a further £650million of grant funding for English local authorities for 2019/20, along with £45million for the Disabled Facilities Grant in England in 2018/19 and £84million over the next five years to expand the Children’s Social Care programmes to 20 further councils.
- An additional £1billion for the Ministry of Defence in the period to the end of next year to boost cyber capabilities and anti-submarine warfare capacity and maintain the pace of the Dreadnought programme.
- Mr Hammond announced a £400million in-year bonus to help schools buy kit – a one-off capital payment direct to schools worth an average of £10,000 per primary and £50,000 per secondary.
- An additional £420 million is being made available immediately to local highway authorities to tackle potholes, bridge repairs and other minor works in this financial year.
An additional £420 million is being made available immediately to local highway authorities to tackle potholes.
- The National Productivity Investment Fund is to be expanded to over £38billion by 2023/24, so that over the next five years, total public investment is growing 30% to its highest sustained level in 40 years, including spending on roads, railways, research, and digital infrastructure.
- Mr Hammond announced that the Government is abolishing the use of Private Finance Initiative and PFI2 schemes for future projects.
Business & entrepreneurship
- A package of measures to stimulate business investment includes an increase in the Annual Investment Allowance from £200,000 to £1 million for two years; targeted relief for the cost of acquiring IP-rich businesses; and a permanent; tax relief for new non-residential structures and buildings.
- Start-Up Loans funding to be extended to 2021, helping 10,000 entrepreneurs. Contribution of smaller firms to apprenticeship levy to be reduced from 10% to 5%.
- Business taxation:
- Employment Allowance to be targeted at small and medium businesses with an Employer NICs bill under £100,000 a year from April 2020.
- Lettings Relief to be limited to properties where the owner is in shared occupancy with the tenant from April 2020.
- Entrepreneurs Relief retained, but minimum qualifying period extended from 12 months to two years.
- Threshold for VAT registration to remain unchanged for a further two years. Reforms to IR35 payroll rules to be extended to large and medium-sized firms in the private sector from April 2020.
- A 2% UK digital services tax will come into force in April 2020 and is expected to raise £400million a year.
Business rate bills cut by one-third for the next two years for all retailers in England with a rateable value of £51,000 or less.
The High Street
- Government co-funding totalling £675million for a Future High Streets Fund to support councils in improving their high streets.
- Business rate bills cut by one-third for the next two years for all retailers in England with a rateable value of £51,000 or less, delivering an annual saving of up to £8,000 for up to 90% of all independent shops, pubs, restaurants and cafes.
- Stamp Duty abolished for all first-time buyers of shared ownership properties valued up to £500,000, applied retrospectively to the date of the last Budget.
- Mr Hammond announced a further £500million for the Housing Infrastructure Fund, designed to unlock a further 650,000 homes; a new wave of strategic partnerships with nine English Housing Associations to deliver 13,000 homes; up to £1billion of British Business Bank guarantees to support smaller housebuilders.
- Fuel duty frozen
- Beer and cider duty frozen
- Duties on wine to rise in line with RPI inflation and white ciders to be taxed at a new higher rate.
- Tobacco duty goes up as normal, inflation plus 2%.
- £1billion extra over five years to aid transition
- £1.7billion annual extra to smooth taper rates
Incomes & taxation
- From April 2019, the National Living Wage will rise by 4.9%, from £7.83 to £8.21 an hour.
- Income tax-free personal allowance to rise to £12,500 and higher rate threshold to £50,000 from April 2019, and both to be indexed to inflation from 2021/22.